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STOCKLAND. STAPL (SGP)

Stockland is one of the largest diversified property groups in Australia. Stockland owns, manages and develops a range of assets including shopping centres, office and industrial assets, residential communities and retirement villages.

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The listed property sector has outperformed the broader sharemarket since the beginning of 2011. The S&P/ASX 200 A-REIT Index returned 29 per cent in the 12 months to the end of September, while the S&P/ASX 200 delivered 16.6 per cent over the same timeframe.

Even after the run, the property sector still offers good value for investors with strong dividend yields and prospects for capital growth, says Fiducian Portfolio Services investment manager Conrad Burge.

Companies across the sector are trading at discounts to their net tangible asset values. “What that says is that the sector still appears to be very good value as opposed to buying direct property or unlisted property. It’s still quite good value compared to the broader market as well,” Burge says.

Within the broader property index, some have raised concerns about the outlook for the retail property trusts.

Bricks and mortar retailers have been suffering as poor consumer confidence curbs spending growth. Structural changes to the sector such as the rise of online shopping are also putting pressure on store owners.

But so far, listed shopping centre landlords have been largely unaffected by their tenants’ woes.

“If we look at the shopping centre vacancy rates, they’re still low,” Burge says. “Some of the shops sometimes don’t do well but there are always replacements ready to move in.”

Top quality shopping centres such as Westfield Sydney and Westfield Bondi Junction, and CFS Retail REIT’s Chadstone Mall have been performing well for the landlords throughout the economic downturn. “If you want to be where the buyers are, you have to be in those centres,” Burge says.

Malls focused on discretionary spending, such as those in the portfolios of Charter Hall Retail REIT, Centro Retail Australia and Stockland Property Group, have also held up well. Supermarkets Coles and Woolworths have been locked in battle to attract shoppers, which has benefited the centres they anchor.

But analysts at UBS believe that in the coming years, supermarkets could generate below-trend rent growth for centres that rely on them for income.

“We forecast supermarket inflation of 0.3 per cent for each of the next three years, well below the 20-year and five-year averages,” they said in a note.

Rent growth for supermarket leases is typically linked to inflation, so rent is likely to be slower than in recent years.

Supermarkets contribute about 45 per cent of total rent for Charter Hall Retail REIT and 12 to 15 per cent of total rent for Centro Retail Australia and Stockland Property Group, UBS analysts estimate.